IPO-Bound Pepperfry’s Loss Widens 83% To INR 194 Cr In FY22 As Marketing Expenses Surge

IPO-bound furniture and home goods ecommerce brand Pepperfry’s consolidated net loss widened 83% to INR 194 Cr in the financial year 2021-22 (FY22), hurt by its aggressive investments in marketing and supply chain.

In FY21, Pepperfry had reported a net loss of INR 106.2 Cr, while its adjusted EBIDTA loss stood at INR 39.6 Cr. The latter more than tripled to INR 121.2 Cr in FY22.

After the markets started reopening post the second wave of the Covid-19 pandemic, Pepperfry invested aggressively in marketing and brand in the second hand of FY22 with an aim to rapidly accelerate its growth, re-base the business, and drive traction, the startup said in a statement.

It goes without saying that like several other businesses, Pepperfry, which sells a wide range of furniture and other essential and decorative household products through both offline and online channels, was significantly hit by the pandemic-led lockdown.

Pepperfry’s operating revenue grew 23% to INR 247 Cr in FY22 from INR 201.5 Cr in the previous year, but was outpaced by the rise in expenses. The startup earned INR 224.4 Cr from sale of services and only INR 22 Cr from product sales in FY22. In FY21, it had generated INR 197.1 Cr from sale of services and INR 2.8 Cr from sale of products.

Pepperfry delivers its services by allowing buyers and sellers on its platform to transact, and earns revenue from it via various charges such as shipping fees, assembly charges, processing fees, and more.

Its total revenue stood at INR 264.1 Cr in FY22, a 19% year-on-year (YoY) increase.

Meanwhile, Pepperfry’s Gross Merchandize Value (GMV) rose 33% YoY to INR 1,185 Cr. The brand’s focus on expanding its reach in Tier-2,3 cities helped it double its Pepperfry Studio network, the offline stores. The number of studios stood at over 140 studios as of March 2022. 

Customers who visit Pepperfry Studios now account for 36% of Pepperfry’s business, the startup said, adding that the growth in Studio also resulted in an increase in the share of higher-margin D2C private labels, which contributed 41% to GMV in FY22.

On the other hand, with the expansion and increase in marketing, Pepperfry’s expenses surged 40% to INR 458.1 Cr in FY22 from INR 327.5 Cr in FY21.

Marketing and brand spending contributed the highest to its total expenses at over 28%. The expenditure in this segment jumped as much as 79% to INR 129.9 Cr in FY22 from INR 72.6 Cr in FY21.

To bolster its supply chain, Pepperfry invested in setting up seven new distribution centres, which, the startup claims, has reduced its delivery timelines to less than 10 days across India.

The second biggest contributor to the expenses was logistics cost, which grew 20% YoY to INR 92.9 Cr. 

Pepperfry’s employee benefit expenses, excluding ESOPs, saw a 57% rise to INR 71.3 Cr from INR 45.5 Cr in FY21. The startup, however, spent less on its employee stock ownership plan (ESOP) in FY22, with expenditure dropping 42% to INR 9.6 Cr from INR 16.6 Cr.

The startup’s total employee benefit expenses in FY22 stood at INR 80.9 Cr as against INR 61.1 Cr in the previous fiscal year.

“With the worst effects of Covid behind us in the latter half of FY22, we invested behind our brand and supply chain, expanded our leadership team, and seeded new business segments such as mattresses and modular furniture,” said Ambareesh Murty, cofounder and CEO of Pepperfry.

“I am confident that these investments have set us up well to drive Pepperfry’s next phase of growth,” he added.

Founded in January 2012 by Murty and Ashish Shah, Pepperfry is backed by Goldman Sachs, Norwest Venture Partners, Bertelsmann India Investments, and State Street Global Advisors, It has raised $240 Mn of funding till date. 

Last year, Shah told Inc42 that since announcing its IPO plans in 2019, Pepperfry has tweaked its strategies around improving unit economics, taking measures to optimise operational costs, improve sales, and reduce expenses. 

The startup is reportedly looking to soon file its draft red herring prospectus (DRHP) for IPO with the Securities and Exchange Board of India (SEBI). It has also hired ICICI Bank and JP Morgan to assist it in the IPO process.

In May this year, Pepperfry turned into a public company as part of its IPO plans.